How to keep a construction project on budget
“Make a budget, and stick to it”. I see this advice given time and time again. It sounds good on paper, but anyone that has done any kind of remodeling can tell you there are a thousand things that can break a construction budget in the blink of an eye. Some of us wonder if it is even possible to stay on budget while remodeling a home.
Unfortunately, completing a project on budget often seems to be the exception rather than the rule. But, it doesn’t have to be this way!
What causes construction costs to increase?
I could write an entire book about all the things that can cause a project to go over budget, and I still wouldn’t be able to cover every possible scenario.
At the end of the day, rising project costs generally come from one of three places: Increasing scope of work, rising material costs, and reduction in efficiency.
Let’s look at them one at a time:
Increasing scope of work
Doing more work costs more money. It’s just that simple. Every variation from the original scope of work, no matter how small, will add to the budget.
Sometimes the variation is unavoidable. Your contractor will have a pretty good idea of what he’s going to find when he opens up a wall, but he won’t know for sure until he actually removes the drywall (or plaster, or panelling). Once the drywall is down, he may find things that need to be repaired that weren’t in the original scope of work. This is just a fact of life. There’s only so much we can see before demo, so there is only so much we can plan for before starting the project. Sometimes the scope of work needs to change based on unforeseen conditions.
Fortunately, some changes are avoidable.
We often see people put a lot of time and energy into planning a remodel for one part of their home, such as a bathroom. Once the work gets underway, they start thinking about the things they want to change in other areas of the home, like the adjacent bedroom. It is very tempting to start those projects immediately. After all, the workers are already there, the floors are already covered, and the dust containment is already up. It seems like it would be a good idea to have them start working in the bedroom, too!
The problem is that this additional work usually doesn’t get as much planning as the original project did. The bathroom got months of planning. Every product and finish was carefully chosen, every item was considered and chosen based on the owners preferences, priorities, and budget. The entire project was considered as a whole, to make sure that the floor tile that was chosen would still leave enough budget for the vanity top.
The additional work in other areas of the home rarely get this much planning and scrutiny. Instead, each item is dealt with one at a time, and it doesn’t seem very expensive. A thousand dollars here, five hundred dollars there. But, those small projects add up quickly and what started out as a couple thousand dollar face lift turns into a twenty thousand dollar remodel, seemingly overnight.
Rising material costs
Since covid, the building material market has been absolutely out of control. Material prices have skyrocketed. Items we used to take for granted have been difficult or even impossible to find. This volatility has had a huge impact on material budgets.
Our suppliers used to guarantee pricing for 30 days. This was barely enough time to get a budget together, finalize selections, have the homeowner agree to the final pricing, and get the materials ordered before the guarantee expired. Now, suppliers will only guarantee pricing for 5 days, which is nowhere near enough time to do all of that. So, by the time we can order the materials for a job, the original pricing has expired and we are at the mercy of whatever has happened in the market since then.
Add to that the material shortages that often require us to make changes to material selections, and we have a budgetary nightmare on our hands! Unfortunately, this is a widespread problem that none of us have any control over. Supply chain volatility has become the new norm.
Pre-covid, rising material costs were generally driven by changes a homeowner would make. Deciding to upgrade to a better product, and thereby raising the costs associated with the project. This can still happen today, and thankfully, this is something that a homeowner does have control over.
Reduction in efficiency:
Every project requires a certain amount of work to complete it. Construction professionals do their very best to complete this work in the most efficient way possible. We invest tens of thousands of dollars into tools and equipment that allow us to complete more work in less time, we invest huge amounts of time perfecting our craft and learning to work more efficiently, and we sequence the project tasks in the most efficient order to keep everyone on site working efficiently.
Anything that breaks this efficiency costs time and time costs money. This is most obvious on time & materials jobs, but it applies to fixed price contracts as well.
For exterior jobs, weather is a huge efficiency killer. Bad weather can slow or completely stop progress on a project. Workers can’t work as quickly and need more breaks when it is very hot. Rain will slow productivity on some tasks. Tasks like painting can’t be done at all when it is raining, and some other tasks are simply too dangerous to do in the rain. Snowfall can also slow or stop progress, as can high winds.
Delayed material deliveries can reduce efficiency, either by stopping progress entirely, or forcing workers to do tasks in a less efficient order.
Doing tasks in the wrong order is a common way people kill project efficiency. We see this often when a homeowner hires many different specialty contractors, but no general contractor to oversee them all. A general contractor will know the best sequence of events and make sure that the different “trades” are on site at the optimum time. Not too soon or too late. Having many people on a job often feels like progress, but if they are getting in each other’s way, they aren’t being efficient.
What can we do to keep a construction project on budget?
As you can see, there are many things that effect a project’s budget. A homeowner and/ or contractor have control over some of these. Others are beyond anyone’s control. So, what do we do? Simply put, we control what we can control, and we make sure to have some extra money in the budget to cover the things we can’t control.
Here are some things you can do:
Plan out your project in excruciating detail
If you can have absolutely everything planned before the work starts, including the small decisions like cabinet hardware & paint colors, you can avoid much of the “project creep” that happens when materials get chosen or upgraded later in the project.
Resist the temptation to have work done in other areas of the house
Go ahead and start the planning process for the other rooms, if you want to. But, don’t start those projects until they have been planned out in as much detail as the original project was.
Avoid upgrades later in the project
Sometimes, even the best planned project doesn’t come together exactly as you envisioned. If you find yourself in the middle of a project and you don’t like one of the products you chose, by all means, make a change. You need to be happy with the finished product. But, try not to make a habit of changing things on the fly. If you plan everything out thoroughly in the design phase, those expensive late project changes and upgrades should be very few and far between.
Order materials early
Sure, the sink doesn’t get installed until the cabinets are in and the countertop is being installed. But, having it on site before the project starts will avoid the possibility of a late delivery. It will also be there for the plumber to look at if he has any questions when he is doing the rough plumbing, increasing his efficiency.
Use a contractor you trust and let them do their job
Your contractor knows the most efficient way to get the job done. Sometimes it seems like they could get the project done more quickly by following a different order of tasks, or by having more trades on site at the same time. Often, it’s not that simple. Doing things differently from the way your contractor likes to do them is often going to be less efficient and more costly.
Budget for the things you can’t control
We recommend that you have enough budget to cover all project related costs, including indirect costs (I will talk about those in a different article) plus 20% extra to cover any unanticipated problems and costs. Ideally, you won’t need to use this money, but you’ll want it to be there if anything goes wrong.
You can do It!
It is possible to keep your remodeling project on budget. It just takes thorough planning, good execution, and the flexibility to deal with the things you can’t control. Hopefully, these tips will help you enjoy the process of upgrading your home without the need to worry about breaking the budget in the process.
